Web 3.0 With Chinese Characteristics

Network technologies and the internet have been a major driver of economic growth around the world over the past 20 years. China in many ways exemplify’ s this trend with its growing population of middle-class consumers eager to adopt online platforms and telecommunications technologies which enable convenient services and quick purchases.?

The internet never sleeps. The technologies which have contributed so much to China’s explosive economic growth continue to advance, and are now moving into a new phase of development. In the tech space, this new phase is known as “Web3”, representing the third version of the fundamental technologies behind the internet, and business models built on top of that foundation.

Whereas “Web 2.0” platforms relied primarily on networked access to centralized remote servers which stored and transmitted data to a user’s local device, Web3 systems are designed on a blockchain enabled decentralized network infrastructure.

Web3 applications emphasize use of blockchain systems to create new decentralized, token-based micro-economies. Emergent Machine Learning and Artificial Intelligence solutions will be popular additions where possible.?

Blockchain technology facilitates decentralized governance systems in the form of Decentralized Autonomous Organizations (DAOs) and Decentralized Applications (DApps). For many Web3 developers the ideal is to create systems and networks of distributed communities of interested participants who are able to implement decentralized self-governance via a DAO.

Blockchain Regulation

Chinese authorities have?embraced blockchain?as critical technology of the future, so it is reasonable to conclude they will be enthusiastic about adoption of Web3 platforms. However, where the broader Web3 community has prioritized experimentation in the technology in a creative and competitive context, China’s approach sees efficient data-exchange and industrial application as the priority.

Web3 In China must also develop in accordance with the unique legal and regulatory environment here. Though China promotes blockchain as a technology of the future, the country has adopted a?restrictive regulatory approach?over providers of blockchain based services; requiring blockchain operators to confirm real identity of blockchain users and to maintain the ability to remove content from the blockchain. As such, use of so-called “open blockchain” such as Bitcoin and Ethereum is not permissible in China.

The legal status of cryptocurrencies in China was ambiguous for some time, however in autumn 2021, the People’s Bank of China made clear that a broad range of cryptocurrency related services and activities are?prohibited outright?in the country.

Web3 in China

In this environment, any potential Web3 operator in the country must make significant efforts to ensure their systems comply with China’s regulation on blockchain services, as well as monitoring they systems use and application of blockchain based tokens to ensure they do not risk violations of the prohibitions against cryptocurrencies.

Given this environment, it is no surprise that government is a major leader in Web3 development in China. A variety of government backed projects are seeking blockchain solutions for networked transactions, digital cooperation, data-sharing and energy distribution. There are also major projects offering solutions for agricultural products tracing, supply chain, medical records and even in the area of collection of evidence for judicial proceedings.

Overall, with the major exception of the People’s Bank of China Digital RMB CBDC, Web3 in China is centered on implementing innovative blockchain based technical solutions while avoiding exchanges of value entirely.

In pursuit of this goal, several major players in China have cooperated in the establishment of the “Blockchain-based Service Network” (BSN). BSN is a cooperative project involving China’s major stated-owned telecommunications?and internet companies, and the “State Information Center” a government policy “think tank” under the National Development and Reform Commission, one of the most powerful government agencies in China.

BSN seeks to facilitate development of new DApps used by Chinese businesses, banks, and governments, with a focus on compatibility between multiple blockchain networks. BSN already supports several DApps offering smart contracts and financial services. A new version of the BSN blockchain,?BSN Spartan?is set to be launched as a China compliant, international, public blockchain without cryptocurrency support.